Maritime Administration

Stronger Management Controls Needed Over Vessels in Title XI Custody Gao ID: RCED-92-147 May 22, 1992

As part of its Federal Ship Financing Program, the Maritime Administration manages a portfolio of guaranteed loans valued at nearly $2.6 billion. When a borrower defaults, the Maritime Administration pays off the loan and typically takes title to the primary collateral--the vessel being financed. Because of a lack of basic management controls at the Maritime Administration, however, the government may be realizing less than it should off of the sale of these ships. Specifically, the Maritime Administration has not (1) developed detailed formal policies and procedures to guide vessel management and sales; (2) sufficiently documented important information used in making these decisions, such as the rationale behind decisions on specific ships; and (3) developed adequate performance indicators to assess these decisions.

GAO found that MARAD: (1) under the Title XI Program, pays the outstanding balance of guaranteed vessel purchase or construction loans that borrowers default on, and attempts to recoup the government's losses by selling the vessel; (2) does not have detailed formal policies, procedures, or guidance for decisions concerning the custody, maintenance, and sale of acquired vessels; (3) believes that its review system, which requires numerous officials to approve custody and sale decisions, adequately ensures that the program is achieving its objectives; (4) bases its vessel management and sale decisions on conversations with ship brokers, trade journal information, and field office recommendations; (5) does not have records of key information supporting its vessel management and sale decisions, and maintains some of the information that it does collect in a format that is not useful; (6) lacks procedures to assess its performance in managing and selling vessels or for determining the appropriateness of its decisions; and (7) stated that it has corrected similar problems identified with the National Defense Reserve Fleet Program, but the recurrence of those same problems in the Title XI Program points to an inadequate emphasis placed on developing management controls.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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